- 1). Research interest rates for loans and for investments. Look for favorable mortgage loan rates that are lower than a tax-deferred bond-based or bond-alternative investment so that both the loan and the investment interest rates will remain relatively stable and "in sync" with each other over the term of the loan.
- 2). Obtain a cash out loan. This can be in the form of a home equity line of credit or a cash out refinance.
- 3). Invest the money into a bond or bond-alternative with a time horizon that is equal to the term of the loan. For example, if the loan is a 30 year cash out refinance mortgage, you will want an investment that can sustain a constant (or near constant yield) for 30 years.
This will most likely be a fixed deferred annuity, a tax-free bond, or a high cash value, limited pay dividend paying life insurance policy. - 4). After the term of the loan is up, cash out your investment and take profits.
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